|
![](/web/20061130050128im_/http://www.fin.gc.ca/images/clear.gif) |
- Fiscal Monitor 2001 -
The Fiscal Monitor
Highlights of financial results for July 2001
Highlights
July 2001: budgetary surplus of $0.8 billion
There was a budgetary surplus of $0.8 billion in July 2001, down $1.0 billion from the revised surplus of $1.8 billion in July 2000.[1] This year-over-year decline was attributable to lower budgetary revenues (down $0.5 billion) and higher program spending (up $0.7 billion), dampened slightly by lower public debt charges (down $0.2 billion).
April 2001 to July 2001: budgetary surplus of $10.7 billion
The budgetary surplus was estimated at $10.7 billion for the April 2001 to July 2001 period, compared to the surplus of $10.5 billion reported in the same period of 2000-01. The increase in the year-over-year surplus was attributable to higher personal income tax settlement payments with respect to the 2000 taxation year. These payments related to extraordinary developments, primarily the strong increase in capital gains for the 2000 taxation year. This impact has been largely offset by lower personal income tax revenues from employment income (primarily due to the impact of tax reduction measures) and higher program spending (particularly higher transfers to other levels of government). | July 2001: budgetary results Budgetary revenues decreased $0.5 billion, or 3.3 per cent, in July
2001 on a year-over-year basis, primarily attributable to lower personal
income tax revenues.
- Personal income tax revenues declined by $1.1 billion, or 15.0
per cent, primarily reflecting timing factors affecting revenues reported
in July and August of 2000 (July was up strongly while August
receipts were lower) and the impact of the tax reduction measures
announced in the February 2000 budget and the October 2000 Economic
Statement and Budget Update. In addition, payments under
the Canada Child Tax Benefit were higher due to enhancements
in previous budgets.
- Corporate income tax revenues were up $0.3 billion, or 19.6
per cent. As noted in previous Fiscal Monitors, the current
year-over-year increase primarily reflects the tax instalment
procedures, as operating profits of Canadian corporations declined in
the first quarter of 2001. Corporations are required to remit monthly
instalments based on either their previous year’s actual tax liability
or their current year’s projected tax liability, with final settlement
payments made within 60 days of the end of their taxation year. Throughout
most of 2000-01 monthly tax instalments were based on the tax liability
for 1999. However, corporate profits grew strongly in 2000, with the
result that the monthly instalment payments understated the final tax
liability for 2000-01. With monthly instalments now based on the tax
liability for 2000, the year-over-year change in the monthly results could
be misleading.
Table 1 Summary statement of transactions
|
|
July |
April to July |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Budgetary transactions |
|
|
|
|
Revenues |
14,334 |
13,868 |
59,565 |
61,498 |
Program spending |
-9,066 |
-9,741 |
-35,343 |
-37,557 |
Operating surplus |
5,268 |
4,127 |
24,222 |
23,941 |
Public debt charges |
-3,499 |
-3,345 |
-13,703 |
-13,250 |
Budgetary balance (deficit/surplus) |
1,769 |
782 |
10,519 |
10,691 |
Non-budgetary transactions |
2,421 |
1,041 |
-7,377 |
-9,666 |
Financial requirements/source |
|
|
|
|
(excluding foreign exchange transactions) |
4,190 |
1,823 |
3,142 |
1,025 |
Foreign exchange transactions |
-899 |
-443 |
1,268 |
-131 |
Net financial balance |
3,291 |
1,380 |
4,410 |
894 |
Net change in borrowings |
-7,636 |
-1,589 |
-12,921 |
-10,573 |
Net change in cash balances |
-4,345 |
-209 |
-8,511 |
-9,679 |
Cash balance at end of period |
|
|
4,440 |
3,499 |
|
Note: Positive numbers indicate a net source of funds. Negative
numbers indicate a net requirement for funds.
Numbers for July 2000 have been revised (see footnote in box on first
page).
|
- Employment insurance (EI) premium revenues were slightly lower, as
the decline in premium rates (the employee rate for 2001 is $2.25 per $100
of insurable earnings compared to $2.40 in 2000) more than offset the
impact of the growth in the number of people employed and therefore paying
premiums.
- Excise taxes and duties were up $0.1 billion, or 3.8 per cent.
This increase reflected strong advances in both customs import duties and
sales and excise taxes. The increase in the latter was primarily due to
the increase in tobacco excise taxes, which became effective
April 6, 2001. Goods and services tax (GST) revenues declined
4.3 per cent, primarily due to an increase in refunds related to
under-reporting in previous periods, as well as higher quarterly tax
credits, reflecting the indexation of these credits, as announced in
the February 2000 budget.
- Non-tax revenues were up strongly, primarily reflecting the timing
of receipts.
On a year-over-year basis, program spending increased by $0.7 billion, or 7.4 per cent, reflecting strong increases in transfers to persons and other levels of government. Among the major components:
- Major transfers to persons were up $0.3 billion, or 11.2 per cent,
reflecting both higher elderly and EI benefit payments. The increase
in EI benefit payments reflects the impact of policy
enhancements announced in the February 2000 budget and last
September, as well as an increase in the number of beneficiaries.
- Major transfers to other levels of government were up $0.4 billion,
or 20.6 per cent, reflecting higher cash transfers under the Canada Health
and Social Transfer (CHST) and fiscal transfer programs. The increase in
the CHST reflected the September 2000 agreement reached by
first ministers to increase base funding from $13.5 billion in
2000-01 to $17.3 billion in 2001-02. The increase in fiscal transfers is
attributable to higher equalization entitlements.
Table 2 Budgetary revenues
|
|
July |
|
April to July |
|
|
2000 |
2001 |
Change |
2000-01 |
2001-02 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
Income taxes |
|
|
|
|
|
|
Personal income tax |
7,476 |
6,358 |
-15.0 |
29,319 |
29,217 |
-0.3 |
Corporate income tax |
1,695 |
2,028 |
19.6 |
7,875 |
8,859 |
12.5 |
Other income tax revenue |
298 |
291 |
-2.3 |
1,109 |
1,203 |
8.5 |
Total income tax |
9,469 |
8,677 |
-8.4 |
38,303 |
39,279 |
2.5 |
Employment insurance |
|
|
|
|
|
|
premium revenues |
1,667 |
1,654 |
-0.8 |
6,976 |
6,981 |
0.1 |
Excise taxes and duties |
|
|
|
|
|
|
Goods and services tax |
1,739 |
1,664 |
-4.3 |
8,233 |
8,468 |
2.9 |
Customs import duties |
201 |
250 |
24.4 |
656 |
923 |
40.7 |
Sales and excise taxes |
658 |
784 |
19.1 |
2,738 |
2,959 |
8.1 |
Total excise taxes and duties |
2,598 |
2,698 |
3.8 |
11,627 |
12,350 |
6.2 |
Total tax revenues |
13,734 |
13,029 |
-5.1 |
56,906 |
58,610 |
3.0 |
Non-tax revenues |
600 |
839 |
39.8 |
2,659 |
2,888 |
8.6 |
Total budgetary revenues |
14,334 |
13,868 |
-3.3 |
59,565 |
61,498 |
3.2 |
|
- Direct program spending, consisting of total program spending
less major transfers to persons and other levels of government, was down
slightly, as declines in payments to Crown corporations and operating
and capital expenditures more than offset higher subsidies and other
transfers. The monthly fluctuations in these components are due in
large part to the timing of payments.
Public debt charges, on a year-over year basis, were down $0.2 billion, or 4.4 per cent, reflecting both a lower stock of interest-bearing debt and a decline in the average effective interest rate on that debt.
April 2001 to July 2001: budgetary results
Over the first four months of fiscal year 2001-02, the budgetary surplus was estimated at $10.7 billion, up $0.2 billion from the surplus reported in the same period of 2000-01. This increase in the surplus primarily reflects higher personal income tax settlement payments with respect to the 2000 taxation year.
Budgetary revenues were up $1.9 billion, or 3.2 per cent, on a year-over-year basis. Among the major components:
- Personal income tax collections were marginally lower, down $0.1 billion, or 0.3 per cent. This decline reflects the timing of payments
between July and August of last year as well as the impact of the tax
reduction measures announced in the February 2000 budget and October 2000 Economic
Statement and Budget Update. These included the reduction in
personal income tax rates, the elimination of the 5-per-cent surtax,
increases in the thresholds, the restoration of full indexation of the
personal income tax system and related benefits, and increases in the
Canada Child Tax Benefit. Dampening the impact of these factors were
higher final tax payments, received in April and May, with respect to
the 2000 taxation year, reflecting extraordinary developments in taxation
year 2000, primarily strong increases in capital gains.
Table 3 Budgetary expenditures
|
|
July |
|
April to July |
|
|
2000 |
2001 |
Change |
2000-01 |
2001-02 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
|
|
|
|
|
|
|
Transfer payments to: |
|
|
|
|
|
|
Persons |
|
|
|
|
|
|
Elderly benefits |
2,012 |
2,103 |
4.5 |
7,948 |
8,306 |
4.5 |
Employment insurance benefits |
809 |
1,035 |
27.9 |
3,511 |
3,926 |
11.8 |
Total |
2,821 |
3,138 |
11.2 |
11,459 |
12,232 |
6.7 |
Other levels of government |
|
|
|
|
|
|
Canada Health and Social Transfer |
1,125 |
1,442 |
28.2 |
4,500 |
5,767 |
28.2 |
Fiscal transfers |
978 |
1,045 |
6.9 |
3,862 |
4,143 |
7.3 |
Alternative Payments for |
|
|
|
|
|
|
Standing Programs |
-206 |
-200 |
-2.9 |
-822 |
-800 |
-2.7 |
Total |
1,897 |
2,287 |
20.6 |
7,540 |
9,110 |
20.8 |
Direct program spending |
|
|
|
|
|
|
Subsidies and other transfers |
|
|
|
|
|
|
Agriculture |
27 |
41 |
51.9 |
54 |
422 |
681.5 |
Foreign Affairs |
102 |
177 |
73.5 |
346 |
503 |
45.4 |
Health |
99 |
121 |
22.2 |
353 |
394 |
11.6 |
Human Resources Development |
115 |
123 |
7.0 |
411 |
362 |
-11.9 |
Indian and Northern Development |
262 |
326 |
24.4 |
1,743 |
1,496 |
-14.2 |
Industry and Regional Development |
82 |
104 |
26.8 |
365 |
430 |
17.8 |
Veterans Affairs |
123 |
127 |
3.3 |
478 |
493 |
3.1 |
Other |
73 |
25 |
-65.8 |
883 |
568 |
-35.7 |
Total |
883 |
1,044 |
18.2 |
4,633 |
4,668 |
0.8 |
Payments to Crown corporations |
|
|
|
|
|
|
Canadian Broadcasting Corporation |
86 |
80 |
-7.0 |
371 |
400 |
7.8 |
Canada Mortgage and |
|
|
|
|
|
|
Housing Corporation |
150 |
158 |
5.3 |
620 |
632 |
1.9 |
Other |
128 |
122 |
-4.7 |
475 |
510 |
7.4 |
Total |
364 |
360 |
-1.1 |
1,466 |
1,542 |
5.2 |
Operating and capital expenditures |
|
|
|
|
|
|
Defence |
948 |
908 |
-4.2 |
2,979 |
3,227 |
8.3 |
All other departmental expenditures |
2,153 |
2,004 |
-6.9 |
7,266 |
6,778 |
-6.7 |
Total |
3,101 |
2,912 |
-6.1 |
10,245 |
10,005 |
-2.3 |
Total direct program spending |
4,348 |
4,316 |
-0.7 |
16,344 |
16,215 |
-0.8 |
Total program expenditures |
9,066 |
9,741 |
7.4 |
35,343 |
37,557 |
6.3 |
Public debt charges |
3,499 |
3,345 |
-4.4 |
13,703 |
13,250 |
-3.3 |
Total budgetary expenditures |
12,565 |
13,086 |
4.1 |
49,046 |
50,807 |
3.6 |
|
Memorandum item: |
|
|
|
|
|
|
Total transfers |
5,601 |
6,469 |
15.5 |
23,632 |
26,010 |
10.1 |
|
- Corporate income tax revenues were up $1.0 billion, or 12.5
per cent. In contrast, corporate profits are down on a year-over-year
basis, which suggests that the current experience reflects the effects of
the remittance procedures and should be revised once corporations
adjust their remittances to reflect weaker profits in 2001.
- EI premium revenues were up marginally, as the decline in
premium rates for 2000 and 2001 virtually offset the impact of prior-year
adjustments and the growth in the number of people employed and
therefore paying premiums. The employee rate for 2001 is $2.25 per
$100 of insurable earnings, compared to $2.40 in 2000 and $2.55 in 1999.
- Excise taxes and duties increased by $0.7 billion, or 6.2 per
cent. GST revenues were up 2.9 per cent, somewhat less than the
underlying increase in consumer expenditures. Customs import duties were
up 40.7 per cent, while sales and excise taxes were up
8.1 per cent, in part reflecting the increase in tobacco
excise taxes.
- Non-tax revenues were up 8.6 per cent.
Program spending increased by $2.2 billion, or 6.3 per cent, in the April 2001 to July 2001 period, compared to the same period last year.
- Transfers to persons were up 6.7 per cent, attributable to higher
elderly and EI benefit payments. The increase in elderly benefit payments
reflects an increase in the number of individuals eligible for
benefits and higher average benefits, which are indexed to inflation. The
increase in EI benefit payments primarily reflects the impact of program
enhancements, as well as an increase in the number of beneficiaries.
- Major transfers to other levels of government were up 20.8 per
cent, reflecting higher cash transfers under the CHST and fiscal transfer
programs. The increase in the CHST reflected the September 2000 agreement
reached by first ministers to increase base funding from
$13.5 billion in 2000-01 to $17.3 billion in 2001-02. The increase in
fiscal transfers was primarily due to higher equalization
entitlements, reflecting the continued stronger growth in Ontario than in
the equalization-receiving provinces.
- Direct program spending, consisting of total program spending less
the major transfers to persons and other levels of government, declined by
0.8 per cent. During the first few months of the fiscal year, developments
in this component are largely affected by the timing of payments.
Public debt charges were down 3.3 per cent, reflecting the impact of declines in both the stock of interest-bearing debt and the average effective interest rate on that debt.
Financial source of $1.0 billion (excluding foreign exchange
transactions) for April 2001 to July 2001
The budgetary balance is presented on a modified accrual basis of accounting, recording government liabilities when they are incurred, regardless of when the cash payment is made. In addition, the budgetary balance includes only those activities over which the Government has legislative control.
In contrast, financial requirements/source measures the difference between cash coming in to the Government and cash going out. Financial requirements/source differs from the budgetary balance as the former includes transactions in loans, investments and advances, federal employees’ pension accounts, other specified purpose accounts, and changes in other financial assets and liabilities. These activities are included as part of non-budgetary transactions. The conversion from accrual to cash is also reflected in non-budgetary transactions.
Non-budgetary transactions resulted in a net requirement of $9.7 billion in the first four months of 2001-02, compared to a net requirement of $7.4 billion in the same period in 2000-01. Traditionally, there are large requirements in the first half of any fiscal year, reflecting the payment of personal income tax refunds and certain liabilities, which were recognized in previous years’ budgetary results.
As a result, with a budgetary surplus of $10.7 billion and a net requirement of $9.7 billion from non-budgetary transactions, there was a financial source (excluding foreign exchange transactions) of $1.0 billion in the April 2001 to July 2001 period, compared to a source of $3.1 billion in the same period last year.
Table 4 The budgetary balance and financial requirements/source
|
|
July |
April to July |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Budgetary balance (deficit/surplus) |
1,769 |
782 |
10,519 |
10,691 |
Loans, investments and advances |
|
|
|
|
Crown corporations |
-112 |
-16 |
83 |
217 |
Other |
49 |
-26 |
162 |
7 |
Total |
-63 |
-42 |
245 |
224 |
Specified purpose accounts |
|
|
|
|
Canada Pension Plan Account |
-865 |
-418 |
-890 |
-861 |
Superannuation accounts |
375 |
50 |
1,017 |
-446 |
Other |
11 |
77 |
-216 |
53 |
Total |
-479 |
-291 |
-89 |
-1,254 |
Other transactions |
2,963 |
1,374 |
-7,533 |
-8,636 |
Total non-budgetary transactions |
2,421 |
1,041 |
-7,377 |
-9,666 |
Financial requirements/source
(excluding foreign exchange transactions) |
4,190 |
1,823 |
3,142 |
1,025 |
Foreign exchange transactions |
-899 |
-443 |
1,268 |
-131 |
Net financial balance |
3,291 |
1,380 |
4,410 |
894 |
|
Table 5 Net financial balance and net borrowings
|
|
July |
April to July |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Net financial balance |
3,291 |
1,380 |
4,410 |
894 |
Net increase (+)/decrease (-) in borrowings |
|
|
|
|
Payable in Canadian dollars |
|
|
|
|
Marketable bonds |
-3,075 |
400 |
6,151 |
-1,641 |
Canada Savings Bonds |
-151 |
-70 |
-553 |
-236 |
Treasury bills |
-4,200 |
-1,500 |
-16,750 |
-6,100 |
Other |
250 |
|
925 |
-4 |
Total |
-7,176 |
-1,170 |
-10,227 |
-7,981 |
Payable in foreign currencies |
|
|
|
|
Marketable bonds |
|
|
-2,174 |
-1,576 |
Notes and loans |
|
|
|
-41 |
Canada bills |
-435 |
-419 |
-520 |
-802 |
Canada notes |
|
|
|
-173 |
Total |
-435 |
-419 |
-2,694 |
-2,592 |
Net change in borrowings |
-7,611 |
-1,589 |
-12,921 |
-10,573 |
Change in cash balance |
-4,320 |
-209 |
-8,511 |
-9,679 |
|
Table 6 Condensed statement of assets and liabilities
|
|
March 31,
2001 |
July 31,
2001 |
Change |
|
|
($ millions) |
Liabilities |
|
|
|
Accounts payable, accruals and allowances |
43,511 |
34,875 |
-8,636 |
Interest-bearing debt |
|
|
|
Pension and other accounts |
|
|
|
Public sector pensions |
129,692 |
129,246 |
-446 |
Canada Pension Plan (net of securities) |
6,409 |
5,548 |
-861 |
Other pension and other accounts |
7,080 |
7,133 |
53 |
|
|
Total pension and other accounts |
143,181 |
141,927 |
-1,254 |
Unmatured debt |
|
|
|
Payable in Canadian dollars |
|
|
|
Marketable bonds |
294,627 |
292,986 |
-1,641 |
Treasury bills |
88,700 |
82,600 |
-6,100 |
Canada Savings Bonds |
25,753 |
25,517 |
-236 |
Other |
3,473 |
3,469 |
-4 |
|
|
Subtotal |
412,553 |
404,572 |
-7,981 |
Payable in foreign currencies |
33,171 |
30,579 |
-2,592 |
Total unmatured debt |
445,724 |
435,151 |
-10,573 |
Total interest-bearing debt |
588,905 |
577,078 |
-11,827 |
Total liabilities |
632,416 |
611,953 |
-20,463 |
Assets |
|
|
|
Cash and accounts receivable |
18,612 |
8,933 |
-9,679 |
Foreign exchange accounts |
50,010 |
50,141 |
131 |
Loans, investments and advances
(net of allowances) |
14,268 |
14,044 |
-224 |
|
|
Total assets |
82,890 |
73,118 |
-9,772 |
|
|
Accumulated deficit (net public debt) |
549,526 |
538,835 |
-10,691 |
|
Note: Assumes fiscal balance of $15 billion for 2000-01. |
Net financial source of $0.9 billion for April 2001 to July
2001
Foreign exchange transactions represent all transactions in international reserves held in the Exchange Fund Account. The purpose of the Exchange Fund Account is to promote order and stability in the foreign exchange market. The buying of Canadian dollars represents a source of funds from exchange fund transactions, while the selling of Canadian dollars represents a requirement. Changes in foreign currency liabilities, which are undertaken to change the level of Canada’s foreign exchange reserves, also impact on foreign exchange transactions. Taking all of these factors into account, there was a net requirement of $0.1 billion in the first four months of 2001-02, compared to a net source of $1.3 billion in the same period in 2000-01.
With a budgetary surplus of $10.7 billion, a net requirement of $9.7 billion from non-budgetary transactions and a net requirement of $0.1 billion from foreign exchange transactions, there was a net financial source of $0.9 billion in the April 2001 to July 2001 period, compared to a net source of $4.4 billion in the same period in 2000-01.
Net borrowings down $10.6 billion for April 2001 to July 2001
Although there was a net financial source of only $0.9 billion in the first four months of 2001-02, the Government did reduce its holding of market debt by $10.6 billion through the drawing down of cash balances. The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis. At the end of July 2001 they stood at $3.5 billion, down $9.7 billion from March 31, 2001.
Note to Readers:
The Government’s financial statements are presented on a modified accrual basis of accounting. This means that while most operating expenditures and non-tax revenues are recorded in the financial statements when they are incurred or earned (even if cash is not paid out or received until later), tax revenues are accounted for when cash is received and the entire amount of capital acquisitions, such as buildings, are treated as expenditures when acquired. In the February 1995 budget the Government announced its intention to adopt full accrual accounting. To this end, it has successfully introduced the Financial Information Strategy (FIS), a multi-year project which modernized financial systems and accounting practices. FIS consists of three components: the implementation of new financial systems, the adoption of full accrual accounting, and the provision of improved financial information to managers. In the 2000 budget the Government set a target date of 2001-02 for implementation of the first two components of FIS.
For the time being the monthly results for 2001-02 will continue to be presented on a modified accrual basis of accounting. However, the final audited financial statements for 2001-02, scheduled for release in the fall of 2002, will be presented on a full accrual basis of accounting. Previous years’ results will also be restated on a full accrual basis. For more information, see the backgrounder Implementation of Full Accrual Accounting in the Federal Government’s Financial Statements at www.fin.gc.ca.
1 The surplus for July 2000 was revised down from the originally reported estimate of $3.2 billion to $1.8 billion. This was due to a misclassification of revenues between July 2000 and August 2000. The August 2000 budgetary balance will be adjusted accordingly. [Return] |